QUIZ 1
1. The auditor should perform which of the following as risk assessment procedure
Analytical procedures
2. Control environment Includes the governance and management functions and the
attitudes, awareness, and actions of those charged with governance and management
concerning the entity’s internal control and its importance in the entity
3. Which of the following situations will normally result to increase in the extent of audit
procedures Decrease in materiality level
4. Which of the following statements is correct regarding the auditor’s primary
objective in performing? The primary objective is to provide the auditor with
knowledge necessary for audit planning
5. The following statements relate directly to test of controls except the following
statements relate directly to test of controls except
6. The development of a general strategy and a detailed approach for the expected
nature, timing, and extent of audit refers to Planning
7. The auditor should consider the nature, extent, and timing of the work to be
performed and should prepare a written audit program for every audit. Which
audit standard is most closely related to this requirement? The work is to be
adequately planned and assistants, if any, are to be properly supervised.
8. The auditor should consider the nature, extent, and timing of the work to be
performed and should prepare a written audit program for every audit. Which
audit standard is most closely related to this requirement An audit program
setting forth in detail the procedures necessary to accomplish the engagement’s
objectives
9. Which of the following procedures would an auditor most likely perform in
planning a financial statement audit Comparing the financial statements to
anticipated results.
10. Analytical procedures used in planning an audit should focus on Enhancing the
auditor’s understanding of the client’s business
11. Analytical procedures, which means the analysis of significant ratios and trends
including the resulting investigation of fluctuations and relationships that are
inconsistent with other relevant information or which deviate from predicted amounts, are
not required to be applied As substantive procedures
12. Which of the following statements is not correct about materiality An auditor
considers materiality for planning purposes in terms of the largest aggregate
level of misstatements that could be material to any one of the financial
statements
13. Adequate planning of the audit work helps the auditor of accomplishing the
following objectives, except: Gathering of all corroborating audit evidence.
14. The extent of planning will vary according to any of the following, except: The
assessed level of control risk.
15. Which of the following would an auditor most likely use in determining
the auditor’s preliminary judgment about materiality The entity’s annualized interim
financial statements
16. Which of the following statements concerning materiality is not correct The
materiality level for the financial statements as a whole determined in the
planning stage of the audit should not be affected by changes in the
circumstances of the engagement.
17. Which of the following statements concerning the relevance of various types
of controls to a financial statement audit is correct Controls over the reliability of
financial reporting are ordinarily most directly relevant to a financial statement
audit, but other controls may also be relevant
18. Which of the following statements is correct concerning an auditor’s assessment
of control risk? Assessing control risk may be performed concurrently during an
audit with obtaining an understanding of the entity’s internal control.
19. Which of the following tests of controls most likely would help assure an auditor
that goods shipped are properly billed Examine shipping documents for matching
sales invoices
20. “Error” includes An incorrect accounting estimate arising from oversight or
misinterpretation of facts.
21. Fraudulent financial reporting involves intentional misstatements including
omissions of amounts or disclosures in financial statements to deceive financial
statement users. It may be accomplished in a number of ways, including
Manipulation, falsification, or alteration of accounting records or supporting
documentation from which the financial statements are prepared.
22. When planning the audit, the auditor should make inquiries of management.
Such inquiries should address the following, except Management’s consideration
of how an element of unpredictability will be incorporated into the nature, timing,
and extent of the audit procedures to be performed
23. The auditor obtains knowledge of client’s business
1. Prior to acceptance of engagement
2. Planning stage of the audit
3. Testing of transactions stage
1. Yes; 2. Yes; 3. Yes
24. Which of the following is the ultimate concern of the knowledge about the
business Consideration of how it affects the financial statements taken as a
whole.
25. According to PSA 320, materiality should be considered by the auditor when:
1. Determining the nature, timing Evaluating the effects
2. and extent of audit procedures. of misstatements
1 - Yes 2 - Yes
26. Which of the following internal control components relates to an entity’s process
for identifying and responding to business risks? Risk assessment
27. Because of inherent limitations, internal control cannot be designed to provide
reasonable assurance regarding the achievement of objectives
concerning Elimination of all fraud
28. When considering an entity’s system of internal control, is one the auditor’s major
concerns is to ascertain whether internal control is designed to provide
reasonable assurance that Financial statements are fairly presented.
29. Narratives, flowcharts, and internal control questionnaires are three commonly
used methods of documenting the study of internal control
30. Proper segregation of functional responsibilities in an effective structure of
internal control calls for separation of the functions of authorization, recording,
and custody
31. In planning the audit, the auditor should assess materiality at two levels the
financial statement level and the account balance level
32. The preliminary judgment about materiality is the _____________ amount by
which the auditor believes the statements could be misstated and still not affect
the decision of reasonable users’ maximum
33. If the auditor sets a low peso amount as the preliminary judgment about
materiality more evidence is required than for a high amount
